OK, call me Captain Obvious, but the first step in getting debt free has got to be to do a budget. We’ve had one lying around that I kinda update here and there, but we do a terrible job living by it, and with a second kiddo going into daycare soon, I knew I needed to see how things worked out on paper. When the older kiddo is occupied and if the baby is napping, I have been slowly plugging away at a new budget. The process of putting together a brand new budget has been eye opening.
Here are the things I learned about our circumstances:
- I could afford to stay home if we didn’t have any student loan debt, and it wouldn’t be all that tight. Perhaps it really is time to consider using the 401(k)s toward our debt, but we’d need a plan for getting our retirement funds immediately back on track.
- Remember my post about living on 14k a year? Yeah, I proved it would be almost doable here, if we didn’t have student loans, daycare, or a mortgage. We’d still be a bit shy because of the increased costs associated with the harsh climate.
- With a second child in daycare, things are tighter than they would be if I stayed home with the student loan debt paid off
- We will not be able to afford to put anything toward savings or debt reduction
- The new budget makes almost no room for vacations. At best, it looks like we can do a “staycation” and do 1-2 cheap family activities – if we save a few month’s worth of activity budget
- I feel better about this budget than previous attempts because it’s accounting for home repairs (important when your home is 100 years old) and vehicle repairs. Before, I just pretended these would never be needed.
- On the other hand, I do not feel great about this budget because it doesn’t take into account our car payment. As I mentioned in a previous post, my in-laws have pledged the payments for a couple of years, so they either need to keep paying it, we need to sell the vehicle, or we need to earn an additional $5k a year. Ugh.
- One note for us to consider is our FSA. Brian has $5k taken out of his checks each year and placed in an FSA, which reimburses us for daycare expenses. I did not account for the reimbursement in our budget, so we actually do have money to cover the car payments if we need to. Otherwise, we can put that money straight toward debt reduction and/or savings.
The budget still needs to be reviewed by my husband, but I think we can safely start rolling with this and make tweaks as we need to. In a sick way, I’m looking forward to challenging ourselves. We will have to stop hopping in the car and running out for just one more tool for a project or just one more item for dinner. We’ll have to find ways to enjoy our family time without driving all over (we live pretty far out from the main attractions) because gas doesn’t get a huge allotment in the budget. And I’ll certainly be challenged to make our grocery bill smaller, but given how much food I throw out at the end of the week, I think it’s doable with smart meal planning (I already meal plan, but I don’t do a great job of sticking to the plan).
Wish us luck, we definitely need it!
Do you have a budget? If so, do you actually stick with it?